March 10, 2020 / 7:08 PM / 3 months ago

UPDATE 1-U.S. natgas jumps almost 9% with oil price gain, hopes of output cuts

 (Adds latest prices)
    March 10 (Reuters) - U.S. natural gas futures soared almost 9% on Tuesday, following a 10% increase
in oil prices, on hopes of economic stimulus and expectations the oil price collapse will prompt U.S.
drillers to cut back on oil and gas production in shale basins.
    Analysts said a cutback in U.S. production and a possible increase in gas use spurred by low prices
should give demand a chance to grow, absorbing some of the supply glut that built up over the past few
years.
    "Gas futures gained momentum throughout the day yesterday and are building on those increases today
as the market continues to garner support from oil's abrupt tumble" on Monday, Daniel Myers, market
analyst at Gelber & Associates in Houston, said in a report, noting "lower oil prices are further
solidifying anticipated supply reductions this year."
    Much of the growth in U.S. gas output in recent years has come from gas associated with the
production of oil in shale basins like the Permian in West Texas and eastern New Mexico. Since drillers
in oil basins were seeking crude, that production was insensitive to low gas prices.
    Energy firms kept producing oil and associated gas even though gas prices in the Permian fell to
negative levels. In 2019, they also burned or flared record amounts of gas in the Permian because output
there increased more quickly than companies could build pipelines to transport the fuel to markets.

    The oil price rout has already prompted several U.S. shale producers to rush to deepen spending cuts,
which could reduce production.
    In their biggest daily percentage gain since January, front-month gas futures for April
delivery on the New York Mercantile Exchange rose 15.8 cents, or 8.9%, to settle at $1.936 per million
British thermal units, their highest close in almost three weeks.
    Gains in some forward months were even bigger than the front-month, with futures for the balance of
2020 up about 7% and calendar 2021 trading over 2022 for the first time
since January.
    Oil prices jumped by 10% on Tuesday, bouncing from the biggest rout in nearly 30 years a day
earlier, as the possibility of economic stimulus encouraged buying and U.S. producers slashed spending in
a move that could cut output.
    Traders noted the rise in gas prices so far this week came even though meteorologists forecast milder
weather over the next two weeks. That could cut heating demand enough this week to allow utilities to
inject gas into storage for the first time this year - about three weeks earlier than usual.
    Data provider Refinitiv projected average demand in the U.S. Lower 48 states, including exports,
would edge up from 99.8 billion cubic feet per day (bcfd) this week to 101.8 bcfd next week. That is much
lower than Refinitiv's forecast on Monday of 100.7 bcfd this week and 107.5 bcfd next week due to the
milder outlook.
    
                                        Week ended     Week ended    Year ago    Five-year   
                                         March 6        Feb. 28      March 6      average    
                                        (Forecast)      (Actual)                  March 6    
 U.S. natgas storage (bcf):                -63            -109         -164         -99      
                                                                                             
                                                                                             
 Refinitiv Heating (HDD), Cooling (CDD) and Total (TDD) Degree Days                          
 Two-Week Total Forecast               Current Day     Prior Day    Prior Year    10-Year    30-Year Norm
                                                                                   Norm      
 U.S. GFS HDDs                             244            257          293          280          287
 U.S. GFS CDDs                              23             14           10          14            10
 U.S. GFS TDDs                             267            271          370          294          297
                                                                                             
 Refinitiv U.S. Weekly GFS Supply and Demand Forecasts                                       
                                        Prior Week    Current Week  Next Week    This Week    Five-Year
                                                                                 Last Year   Average For
                                                                                                Month
 U.S. Supply (bcfd)                                                                                
                                                                                             
 U.S. Lower 48 Dry Production              93.9           93.6         93.7        88.5          76.9
 U.S. Imports from Canada                  7.1            6.7          7.1          8.6          8.5
 U.S. LNG Imports                          0.1            0.1          0.0          0.1          0.2
 Total U.S. Supply                        101.2          100.4        100.8        97.2          85.6
 
 U.S. Demand (bcfd)
 U.S. Exports to Canada                    2.8            3.0          2.9          3.1          2.6
 U.S. Exports to Mexico                    5.6            5.5          5.6          4.8          3.8
 U.S. LNG Exports                          8.1            7.9          8.4          5.1          1.8
 U.S. Commercial                           13.2           10.6         11.0        13.4          12.3
 U.S. Residential                          20.5           15.7         16.6        21.7          19.4
 U.S. Power Plant                          28.7           27.1         27.3        25.1          23.7
 U.S. Industrial                           23.8           23.0         23.1        23.4          22.6
 U.S. Plant Fuel                           4.6            4.6          4.6          4.6          4.7
 U.S. Pipe Distribution                    2.5            2.2          2.3          2.3          2.5
 U.S. Vehicle Fuel                         0.1            0.1          0.1          0.1          0.1
 Total U.S. Consumption                    93.4           83.4         84.9        90.6          85.3
 Total U.S. Demand                        109.9           99.8        101.8        103.6         93.5
                                                                                             
                                                                                             
 SNL U.S. Natural Gas Next-Day Prices ($ per mmBtu)                                          
 Hub                                   Current Day     Prior Day                             
 Henry Hub NG-W-HH-SNL                   1.74           1.76                               
 Transco Z6 New York NG-CG-NY-SNL        1.42           1.54                               
 PG&E Citygate NG-CG-PGE-SNL             2.63           2.64                               
 Dominion South NG-PCN-APP-SNL           1.35           1.52                               
 Chicago Citygate NG-CG-CH-SNL           1.54           1.52                               
 Algonquin Citygate NG-CG-BS-SNL         1.56           1.62                               
 SoCal Citygate NG-SCL-CGT-SNL           2.09           1.90                               
 Waha Hub NG-WAH-WTX-SNL                 0.40           0.25                               
                                                                                             
 SNL U.S. Power Next-Day Prices ($ per megawatt-hour)                                        
 Hub                                   Current Day     Prior Day                             
 New England EL-PK-NPMS-SNL             17.75          19.25                               
 PJM West EL-PK-PJMW-SNL                19.50          19.50                               
 Ercot North EL-PK-ERTN-SNL             24.00          15.25                               
 Mid C EL-PK-MIDC-SNL                   30.38          28.75                               
 Palo Verde EL-PK-PLVD-SNL              34.50          27.75                               
 SP-15 EL-PK-SP15-SNL                   32.75          29.50                               
 
 (Reporting by Scott DiSavino; Editing by Dan Grebler and Richard Chang)
  
 
 
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